Governor Choudhury: The path on beneficial ownership

Anwar Choudhury in his office at the top floor of the government administration building Thursday. - Photo: Brent Fuller

The Cayman Islands must take control of specific changes to its beneficial ownership regime for registered companies, rather than allowing “someone else” to do it for us, Governor Anwar Choudhury said Thursday during an interview with the Cayman Compass.

Governor Choudhury said he was aware that many in Cayman opposed the idea of the U.K. House of Commons seeking to legislate for its British Overseas Territory, as it did on May 1, essentially requiring the islands to adopt a public register of company ownership via order-in-council if Cayman declined to do it voluntarily.

However, the governor also pointed out that the deadline date for that to occur, Dec. 31, 2020, is well more than two years away, and “there’s a lot of road left between now and 2020.”

The House of Commons voted for an amendment to the Sanctions and Anti-Money Laundering Bill on May 1 to require that all British Overseas Territories – but not Crown Dependencies – create publicly available registers for company ownership in their jurisdictions. Cayman currently has a company register, but it can only be inspected upon request by certain law enforcement agencies or taxation authorities.

“The amendment says that the overseas territories … if we do not move to an open registry, there should be an order in council mandating us to do so,” Governor Choudhury said. “What it doesn’t say is what the order in council should say, it doesn’t describe what … the open register should look like.”

The governor said the idea behind the U.K. bill’s amendment, a move toward openness and transparency, is generally a good one. “We can’t have people hiding criminality,” he said.

However, he noted that Cayman is an advanced financial services jurisdiction and said most of the firms doing business here are perfectly legitimate.

“All they want is privacy, which is a fundamental human right,” he said.

“We should look at it very carefully … make sure that our industry is given confidence and our investors are given confidence that we will move forward in a proper way. There’s a lot of road between now and 2020, getting a public register that we design, that we think is compliant, is important. [We must] fix it for ourselves, rather than someone fixing it for us.”

The governor said he did not believe he was in an “awkward position” with regard to the beneficial ownership issue, but he also didn’t seem to give much credence to challenging any orders in council backed by parliament within the U.K. courts – which is ultimately where Cayman would have to go if it sought to take that path.

There has already been a request to review Cayman’s constitutional relationship with the U.K. in the wake of the May 1 vote in the Commons, and Governor Choudhury said that will be discussed during an upcoming Joint Ministerial Council meeting set for June 14.

“It is right that [the constitution] evolves … and gets better,” he said. “But we must make sure we don’t throw away the baby in the emotion of the moment.

“The security, the wealth of our nation is safeguarded by our laws, our constitution … that gives markets and business and people confidence in our country. That should be primary in our minds.”

Premier Alden McLaughlin has not offered specific proposals publicly, but noted shortly after meetings held in the U.K. last month that Cayman would be making requests for constitutional change to the U.K., seeking to protect Cayman from further orders in council.

The Governor is talking misleading nonsense. The UK bill requires Cayman to introduce “a publicly accessible register of beneficial ownership of companies” by the deadline, failing which the Order-in-Council must introduce such a register. Section 6(7) of the bill expressly defines “publicly accessible register of the beneficial ownership of companies” as “a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006”. The relevant UK Companies Act provisions referred to are detailed and prescriptive as to what the register must contain. There is no material wiggle room for Cayman to “design” its own register. Either we introduce basically the same provisions as the UK Companies Act or equivalent provisions will be imposed on us, on the basis that anything else will be deemed by the UK to not be “broadly equivalent” to the UK provisions.